Dataset represents the data returns by running query on Data Source in SSRS Report. For query you can have simple Select statement or you can use Stored Procedure. Report definition does not contain data but it contains query command,fields collection, parameters,filters and data options that include case sensitivity and collation.

There are two types of DataSets

Shared DataSet:

Shared Dataset is dataset which is created by using Shared Data Source and deployed to Report Server. Shared Dataset can be used by multiple reports.
Think about a view or stored procedure that can be used to create multiple reports. For those we can create Share DataSet. For example, we need to use Month Name parameter in multiple reports.We can create shared Dataset for MonthName( that will return us all month names in a year) and can use in multiple reports.

Embedded DataSet:

A Dataset that is created inside a report and only used in single report is called embedded DataSet.